In classical economics, supply and demand have traditionally been examined by economists to explain how markets generate the price and quantity of a traded good. Generally, markets are seen to generate the price and quantity of a traded good by correlating the amount of a given good that manufacturers anticipate selling at a given price (i.e., supply) with the amount of that good that consumers are willing to purchase (i.e., demand). Supply refers to the varying amounts of a certain good that manufactures will supply at different prices. Because, in general, a higher price yields a greater supply, supply is often illustrated by an upward-sloping curve on a graph of price versus quantity during a specified time period. Demand, on the other hand, refers to the quantity of a good that is demanded by consumers at any given price. In this regard, because demand generally decreases as price increases, demand is often illustrated by a downward-sloping curve on a graph of price versus quantity for a specified time period.
To manufacturers, supply and demand curves can be useful tools that can aid in modeling the profitability of a given good. Conventionally, demand curves that are used by manufacturers are based on historical data and estimates. But because adequate historical data and estimates are often lacking in a large number of industries, demand curves are rarely used to model profitability for given goods. Also aiding in the lack of use, demand curves often inadequately integrate variable factors such as market size and prices paid by consumers for given goods. Further, demand curves generally do not account for the impact of variability in the relationship of prices to the number of a given good sold.